Do You Need Life Insurance In Case You Croak?

Posted by Nicole

Now that we’re married and have a mortgage, I’ve been wondering about life insurance. Is it something we need at our age? I’m 31, and Mr. Saver is almost-31 (his birthday is 2 1/2 weeks away). Hopefully, we’ll be living long, healthy and happy lives, but heaven forbid something happens to one of us. It wouldn’t be fair to not only lose your spouse, but also possibly your home, right? That’s where life insurance comes in, to help pay any outstanding debts and funeral expenses. Pretty morbid thinking, I’ve always been a fan of thinking ahead.

We each have minimal life insurance through work (1x our salaries), but that’s nowhere near enough — and it’s not likely that we’ll both stay in the same jobs forever. Plus, there’s retirement. And there’s no way in hell it would be cost-effective to get a life insurance policy at the age of 60-plus.

I found a life insurance needs estimation calculator on MSN, which takes into consideration how much you believe funeral expenses will be, and outstanding mortgage and other debt (car loan, credit card balances). It’s a bit confusing to plug in numbers since you’re only guessing about what your salary/debts will be in the future, but I got a number of $1.23 million. Seems almost excessive, no? That also takes into account the loss of my salary for 20 years. But using the same numbers, the Bankrate calculator only estimates $686,000. So you can either have too much life insurance, or not enough. I prefer to err on the side of caution.

Pros:

Replaces income of deceased spouse

Money would help keep our home (go toward mortgage payment/taxes/expenses)

Covers burial expenses

Help pay for college education of any children we may have

Cons:

Premiums may be higher because Mr. Saver smokes

Extra money our of our pocket each month

Not necessary if we do not have children

In my mind, the “cons” are a stretch, mainly because we’d like to have children one day soon. I think it will be worth looking into getting life insurance for us in the near future.

Tomorrow on Rainy-Day Saver: A look at the four main types of life insurance policies

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